Correlation Between Japan Tobacco and SIRIUS XM
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and SIRIUS XM at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Japan Tobacco and SIRIUS XM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and SIRIUS XM RADIO, you can compare the effects of market volatilities on Japan Tobacco and SIRIUS XM and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Japan Tobacco with a short position of SIRIUS XM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and SIRIUS XM.
Diversification Opportunities for Japan Tobacco and SIRIUS XM
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Japan and SIRIUS is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and SIRIUS XM RADIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIRIUS XM RADIO and Japan Tobacco is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Japan Tobacco are associated (or correlated) with SIRIUS XM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIRIUS XM RADIO has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and SIRIUS XM go up and down completely randomly.
Pair Corralation between Japan Tobacco and SIRIUS XM
Assuming the 90 days horizon Japan Tobacco is expected to under-perform the SIRIUS XM. But the stock apears to be less risky and, when comparing its historical volatility, Japan Tobacco is 1.39 times less risky than SIRIUS XM. The stock trades about -0.02 of its potential returns per unit of risk. The SIRIUS XM RADIO is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest 2,043 in SIRIUS XM RADIO on November 28, 2024 and sell it today you would earn a total of 413.00 from holding SIRIUS XM RADIO or generate 20.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 60.87% |
| Values | Daily Returns |
Japan Tobacco vs. SIRIUS XM RADIO
Performance |
| Timeline |
| Japan Tobacco |
| SIRIUS XM RADIO |
Risk-Adjusted Performance
Weak
Weak | Strong |
Japan Tobacco and SIRIUS XM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and SIRIUS XM
The main advantage of trading using opposite Japan Tobacco and SIRIUS XM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, SIRIUS XM can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SIRIUS XM will offset losses from the drop in SIRIUS XM's long position.| Japan Tobacco vs. China Resources Beer | Japan Tobacco vs. DAIDO METAL TD | Japan Tobacco vs. United Breweries Co | Japan Tobacco vs. ScanSource |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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